Today’s global economic environment is characterised by new political realities.
In the US, there is a new President with ideas and goals different from those of his predecessor.
The US election has led to higher bond yields and a higher-valued US dollar based on expectations of faster growth and more inflation. In Europe, growth and inflation have begun to accelerate, yet unemployment remains stubbornly high in much of the continent.
Meanwhile, important elections are on the horizon for both Germany and France, setting the stage for the policy environment in the coming year. In Asia, growth is stabilising, but risks are piling up in the form of higher debts and rising trade tensions. In the latest edition of Deloitte’s Global Economic Outlook, economists across the globe examine the unfolding environment and offer their thoughts on how things might evolve.
First, Patricia Buckley discusses the US economy in light of the election. She notes that the economy is in “fairly good shape”, but that the incoming administration has fiscal plans designed to boost growth and trade as well as immigration plans meant to shield the US economy from the vicissitudes of the global economy.
In the second article, Alexander Börsch looks back at 2016 and how it was not a bad year for the eurozone from an economic perspective. He discusses how the current environment sets the stage for continued moderate growth with rising inflation.
On the other hand, he notes the political earthquakes that struck Europe in the past year, such as Brexit and the Italian referendum, as well as the various downside risks to Europe’s economy.
In the third article, Ira Kalish looks at the Chinese economy. He discuss how two issues in particular are likely to determine the path of the Chinese economy. First, trade is top of mind, with exports declining due to a high-valued currency, rising wages, and weak external demand. Moreover, the threat of protectionist action by the United States makes the trade outlook uncertain. Second, efforts to cool down an overheated property market are bearing fruit but threaten to undermine growth.
Japan is the topic of the fourth article. Dr Kalish examines how stronger exports have led to an acceleration in economic growth. Moreover, the weakness of the yen bodes well for continued export growth.
In her article on India, Rumki Majumdar offers a detailed examination of the government’s recent and controversial demonetisation. She notes the potentially disruptive effect of this policy.
Mexico is the subject of another article by Jesus Leal Trujillo and Daniel Bachman. The country has attracted quite a bit of attention given President Donald Trump’s talk about renegotiating Nafta. Jesus and Danny examine the history of Mexico’s shift toward freer trade in the past two decades and the economic impact.
In another article, Akrur Barua examines Turkey, an economy with many positive attributes. However, currently Turkey faces some significant challenges, including terrorism, an influx of refugees, slow growth in export markets, and political uncertainty.